S&P 500 rebounds slightly from 2022 low after Bank of England bond purchase plan

S&P 500 opens higher

The S&P 500 rebounded slightly from new 2022 lows on Wednesday following the Bank of England’s bond-buying plan to stabilize the pound’s slide.

The Dow Jones Industrial Average gained 37 points, or about 0.13%. The S&P 500 rose 0.11% and the Nasdaq Composite fell 0.12%.

—Sarah Min

Treasury yields fall, market expectations for Fed soar after Bank of England move

Treasury yields fell sharply after the Bank of England ended plans to sell gilts and instead announced it would temporarily buy bonds to calm markets. Expectations of Federal Reserve rate hikes also declined in the futures market.

The US 10-year yield fell to 3.84% after hitting 4.01% earlier on Wednesday. The 2-year yield, which best reflects Fed policy, fell to 4.14% from 4.31%. Yields move opposite the price.

“We went from QE to QT back to QE,” said Greg Faranello of AmeriVet Securities. The British 10-year was at 4.02%, against a high of 4.58%. QE refers to quantitative easing or the central bank buying bonds, while QT refers to the end of central bank purchases and the potential selling of bonds instead.

“When rates move like that very, very quickly, liquidity comes into question,” Faranello said. “It means guarantees, it means margins, it means additional dislocation potential… It tells you there’s a problem with the plumbing. There’s a problem under the hood.”

Faranello said federal funds futures were pointing to a terminal rate of 4.35% on Wednesday morning, below the Fed’s target of 4.6% for an end point in its federal funds rate. In recent sessions, the futures market had set a high price of 4.75% for fed funds at the start of next year, he noted.

“We’re skimming the Fed rate hikes going forward. That doesn’t mean they’re going to stop. That doesn’t mean they’re going to blink,” he said. declared. “Maybe the Fed isn’t stopping, but it’s taking a more measured approach.”

–Patti Domm

The pound drops after the Bank of England announces the purchase of long-term bonds

The pound slumped, losing 1.32% against the dollar at $1.0612, on Wednesday morning after the Bank of England announced it would start temporarily buying long-term bonds in a bid to keep the stability of financial markets.

“Some might say it’s even more inflationary, so the GBP should crash,” Dennis DeBusschere wrote in a Wednesday note of the BOE announcement. “But that’s probably only true if the BoE doesn’t follow through with aggressive rate hikes.”

That means even shorter rate hikes are now needed, and how the GBP trades from today will be telling, DeBusschere wrote.

“If the GBP holds up, the tail risk will be reduced,” he said, noting the decline in the GBP given that the news so far is not good.

“Bottom line, the macro uncertainty becomes even higher, which will keep the correlations high,” DeBusschere said.

—Carmen Reinicke

Stocks make the biggest moves before market

These companies are making headlines before the bell:

  • Biogen (BIIB) – Biogen soared 45.6% in premarket trading after Biogen and Japanese partner Eisai said their experimental Alzheimer’s drug significantly slowed disease progression in a study, reducing cognitive and functional decline by 27%.
  • Thor Industries (THO) – Thor Industries gained 3.6% in the pre-market after the recreational vehicle maker reported better-than-expected earnings and revenue for its latest quarter. Thor saw particular strength in its motorized RV segment, with a 24.5% gain over the previous year.
  • Lyft (LYFT) – Lyft has said it will freeze hiring through the end of this year. This follows the ride-hailing company’s previous statement that it would “significantly” slow down hiring as it seeks to cut costs. Lyft slipped 2.5% in premarket trading.

Check out more pre-market movers here.

—Peter Schacknow

Apple shares fall

Apple shares fell nearly 4% in premarket trading after a Bloomberg report, citing people familiar with the matter, said the tech company was scrapping plans to ramp up production of new iPhones after demand was below expectations.

Apple reportedly aimed to increase assembly of the iPhone 14 product family to up to 6 million units in the second half of this year before telling suppliers to pull out.

Semiconductor vendors such as Qualcomm and Skyworks also fell after the report, falling 2.9% and 2.5% respectively in the pre-market.

The move by Apple, which has an outsized weight in the S&P 500 given its $2.4 trillion market capitalization, will likely make it difficult for markets to rebound.

British Pound Briefly Appears After Bank of England Announcement

The pound received a brief boost on Wednesday after the Bank of England announced it would buy long-term British government bonds in a bid to stabilize the country’s currency.

The pound recently hit a record low against the dollar around $1.03. On Wednesday, the pound was trading down 0.6% at $1.0672.

—Fred Imbert

European markets fall as global equities retreat

European stocks were down sharply on Wednesday as global markets trailed economic worries over inflation and growth prospects.

The pan-European Stoxx 600 fell 1.9% by mid-morning, with banking and insurance stocks plunging 4.2% to lead the losses. Healthcare was the only sector in positive territory, adding 0.7%.

The negative trade in Europe comes after a scorching night for Asia-Pacific markets.

CNBC Pro: Credit Suisse Says Now’s the Time to Buy Two Green Hydrogen Stocks — and Prices One More Than 200% Up

Credit Suisse says it’s time to enter the green hydrogen business, with a number of catalysts in place to boost the power of clean energy.

“Green hydrogen is a growing market – we are increasing our 2030 market estimates by [over] 4x,” the bank said, predicting green hydrogen production will increase about 40 times by 2030.

He names two stocks to play the boom – giving a rise of more than 200%.

CNBC Pro subscribers can learn more here.

—Weizhen Tan

US 10-year Treasury yield tops 4% for first time since 2010

CNBC Pro: Asset manager reveals what’s next for stocks – and shares how he’s trading the market

Neil Veitch, chief investment officer at Edinburgh-based SVM Asset Management, says he expects the macro landscape to remain “quite challenging” for the rest of the year.

Speaking to CNBC Pro Talks last week, Veitch named the key drivers that could help the stock market become “more constructive” and shared his views on growth versus value.

CNBC subscribers can find out more here.

— Zavier Ong

Questions over profits and potential recession mean more sales could be ahead

The Dow Jones and S&P 500 have fallen for six straight days, with many seeing the broad sell-off typical of so-called “washout” days.

This can sometimes be a counter buy signal on Wall Street, but many investment professionals are skeptical that the sell will end. One reason is that earnings forecasts for next year still show solid growth, which would be unlikely in a recession.

“We know that if we start to see a reversal in 2-year yields…and if we start to see a reversal in the dollar, that gives us the opportunity to rebound from these extremely oversold conditions,” said Andrew Smith, director investments. strategist at Delos Capital Advisors in Dallas. “But I’m having a hard time reconciling in my mind that the earnings story will be as good as expected.”

Additionally, dramatic moves in the bond and currency markets mean “something snapped” and it may be wise to wait for that information to come out, Smith said.

On the positive side, Smith pointed to a strong labor market and signs of continued travel spending as a sign that the US economy may be able to avoid a major recession.

—Jesse Pound

Futures open higher

Stock futures rose slightly after trading began at 6 p.m. Dow futures rose more than 60 points at a time, though those gains have since declined.

Nasdaq 100 futures posted the biggest early jump of three, suggesting the tech could continue to outperform on Wednesday.

—Jesse Pound

S&P 500 hits June low on Tuesday

Although Tuesday’s closing levels showed relatively modest daily moves, the S&P 500 fell below its previous intraday low for the year during the session. The move was seen by many as confirmation that stocks’ summer rally has failed.

The S&P 500 is now 24.3% off its all-time high, and the Dow Jones is also in bearish territory, down about 21.2%. The Nasdaq Composite, whose decline dates back to last November, is 33.2% below its high water mark.

The next key metric for investors in the days ahead could come from the bond market, where the 10-year Treasury yield jumped just below the 4% level.

—Jesse Pound, Christopher Hayes